What is a Stock Exchange: Definition

A stock exchange is a place where people meet to buy and sell shares. It provides a secure platform for buyers and sellers from all over the world, to buy and sell shares of companies that are publicly listed.

Without stock exchanges, it would be impossible for millions of people to gather at one place at one time. Suppose you want to buy shares of Reliance Industries. You wouldn’t know whom to buy it from, nor would you know who owns it. This makes the process of buying and selling complicated.

The stock exchange makes it convenient for people to gather at a fixed time (9AM to 3:30PM) and securely trade their shares. The exchange protects your identity and allows you to trade anonymously. The seller doesn’t know who the buyer is and vice versa.

The advancement of technology has allowed people to trade from anywhere. All you need is a mobile phone, internet connection and a demat account.

Major Stock Exchanges in India

There are two major stock exchanges in India – National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). NSE is the bigger exchange of the two, more than 85% of all trades are executed on NSE.

What is a Stock Exchange: Definition 1
Notice the number in the ‘Volume’ column. It shows the number of shares of ‘Aditya Birla Fashion’ that were traded on December 24 2019. On BSE, 16,103 stocks exchanged hands. On NSE, more than 202,500 shares were traded. The difference in numbers is usually the same for other listed companies too, with the volume on NSE at 15-30 times more than BSE.

BSE was established 145 years ago in 1875. It is the oldest stock exchange in India and the oldest in Asia too. NSE was founded in 1992 and revolutionised stock trading in the country. The company was the first dematerialised (demat) electronic exchange, it was also India’s first fully automated screen-based trading system.

Since NSE was the first to adopt technology, it quickly became the favourite of both stock brokers and traders across the country.

BSE has more than 5000 companies listed on its exchange, including many small and medium businesses. NSE has more than 1500 companies listed on its platform.

Both NSE and BSE are based in Mumbai.

What is a Stock Exchange: Definition 2
A picture of the Bombay Stock Exchange located at Dalal Street in Mumbai.

There are other stock exchanges too like Calcutta Stock Exchange (CSE), Madras Stock Exchange (MSE), Pune Stock Exchange (PSE), Bangalore Stock Exchange (BgSE), Hyderabad Stock Exchange (HSE) etc. But most are no longer functioning or have become irrelevant because BSE and NSE emerged as the two major exchanges.

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